Systems and methods for aiding tax compliance

ABSTRACT

The present disclosure is directed towards systems and methods for aiding compliance with tax collection and reporting obligations. Distributed ledgers may assist with the verified calculation of taxes owed through the use of identity wallets and cryptocurrency transactions may be employed to effectuate payment to sellers as well as payment of taxes owed to the appropriate tax authorities. Verification of identity sources and of tax calculation and transmission engines may reduce compliance obligations on the part of sellers.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application claims the benefit of and priority to U.S. ProvisionalApplication No. 62/666,748, filed May 4, 2018, which is herebyincorporated by reference in its entirety.

This application for letters patent disclosure document describesinventive aspects that include various novel innovations (hereinafter“disclosure”) and contains material that is subject to copyright, maskwork, and/or other intellectual property protection. The respectiveowners of such intellectual property have no objection to the facsimilereproduction of the disclosure by anyone as it appears in publishedPatent Office file/records, but otherwise reserve all rights.

BACKGROUND

Consumption tax compliance has traditionally been a laborious processplacing significant overhead on governments and businesses. In addition,current systems experience an enormous amount of fraud and tax evasion.The present innovations seek to aid in correcting these issues.

Consumption tax accounts for taxes levied on consumption spending ongoods and services. Most consumers pay little attention to these taxesas they are often seen as routine and customary. While going unnoticedby most consumers, Consumption tax accounts for a large portion of thetax base for most developed countries. In 2014 Consumption tax accountedfor 30% of all tax revenue on average among Organization for EconomicCo-operation and Development (OECD) countries. These taxes are usuallyindirect, such as a sales tax or a Value Added Tax (VAT). The modem dayconsumption tax was designed for the era of physical goods, localservices, and limited cross border trade. The latest evolutions inconsumption tax include eInvoicing and Standard Audit File for Tax(SAF-T). Businesses report and file transaction data to a centralizedtax authority database which in turn issues audits on a case by casebasis.

The most popular consumption tax is the VAT. The OECD stipulates “Theoverarching purpose of a VAT is to impose a broad-based tax onconsumption, which is understood to mean final consumption byhouseholds.” VAT is an indirect tax that functions based on an incentivesystem in which every entity in a transaction is taxed and passes on thecost up the supply chain, thus VAT places a tax at each step based onthe value that was added during each stage of production anddistribution.

Most countries with a VAT system employ the credit-invoice method, showngenerally in FIG. 1 , in which all sales by a business are taxable, butthe seller's pass on invoices to the VAT-compliant businesses whopurchases goods and services from them. The businesses in turn claim acredit for taxes paid on their purchases, but then pay VAT on the fullvalue of their sale. The result of this equates to no taxes on salesbetween businesses in the supply chain while the full value of the VATtax is levied on the final consumer. For example, in FIG. 1 , a consumerpurchases a good for $1.69, $0.19 of which is remitted by the retaileras a tax to the government. Similarly, the retailer pays a manufacturer$1.32, 0.12 of which is remitted to as a tax to the government. In thesame way, a manufacturer pays $1.08 to a raw materials producer, $0.08of which is remitted by the raw material producer to the government as atax.

This tax along the supply chain is done to create a financial incentivefor the retailer to charge tax. That is, the retailer must charge tax tothe consumer in order for said retailer to get back the VAT they paid tothe wholesaler or manufacturer. This incentive structure works its wayup the supply chain. This complex and burdensome system is in place toensure one thing; at final sale the consumer is charged VAT.

In October 2008 Satoshi Nakamoto published “Bitcoin: A Peer-to-PeerElectronic Cash System” which evoked a revolution in Distributed LedgerTechnology (DLT) and introduced cryptocurrencies to the world. Buildingon top of the innovations of Bitcoin, Vitalik Buterin created Etheriumin July 2015. Since that time cryptocurrencies have seen anunprecedented level of proliferation over the past few years with thetotal market capitalization of the crypto market reaching $800 billionby late 2017. Even governments have proposed state backed cryptocurrencies.

The proliferation of cryptocurrencies and DLT shows promise and isbeginning to catch on with observers drawing parallels with the 90'sInternet boom. Increasingly so people are viewing cryptocurrencies as analternative form of value to native fiat currencies with 8 percent ofAmericans owning them. The Boston Federal Reserve has estimated that 75%of US consumers who own cryptocurrencies have used them for paymentswithin a 12 month period. This trend of adoption and usage is likely tocontinue in the coming years as the space matures and regulations becomeclearer. One key trend that underpins the rise of cryptocurrencies isthe disintermediation of payment systems. The rationality behind this isthat traditional payment systems that rely on legacy banking are notnearly as efficient as cryptocurrencies. Furthermore, it is likely that“know your customer” laws and other anti-money laundering requirementscan be better met when using cryptocurrencies. Roel Steenbergen, thehead of technology innovation at Dutch based RaboBank postulates that“Instead of today's payments system in which people play a big role,there will be a fully automated system based on a smart mathematicalmodel that makes transactions checkable and indisputable.” It can beunderstood that in such a future in which cryptocurrencies and DLT basedsystems experience mass adoption then there will be billions, if notmore, transactions that take place on these systems and many of thesetransactions will be taxable events on goods and services. How does alegacy tax system that relies on manual calculation and remittance adoptto a decentralized system that facilitates billions of transactions? Thecurrent VAT system is ill equipped to tackle such a challenge.

The advancement in DLT has also given birth to new possibilities ofhuman organization in the form of the Decentralized AutonomousOrganization (DAO). DAO's fundamentally change the conventionalrelationship between employees, customers, and shareholders that hasbeen in place for a millennia. The traditional business model functionson a fundamental mismatch between all parties. Shareholders seek toextract the maximum amount of return, employees are incentivized toextract the maximum personal profit in the form of compensation thusmotivating them to extract the maximum amount of value from customers.The DAO seeks to fundamentally alter this system of incentives bydisintermediating the hierarchy of traditional systems and distributingownership across all participants. This will lead to further levels ofautomation and the expectation that tax also be automated. Systems suchas DAO's require yet nonexistent infrastructure in order to facilitatecommerce while staying compliant.

The current state of VAT laws are summed up well in the comments of EUtax commissioner Pierre Moscovici; “VAT [laws] are a quarter of acentury old and no longer fit for purpose.”

VAT laws have evolved extensively over the past decades, but have yet toadvance in such a way as to deal most effectively with virtual goods andservices, cross-border trade, digital borderless economies, IOT devices,the sharing economy, and the latest advancement in technology—DLT andcryptocurrencies. This lack of advancement has been noted by the OECDwhich has stated; “The Digital economy magnifies these challenges, asthe evolution of technology has dramatically increased the capability ofprivate consumers to shop online and the capability of businesses tosell to consumers around the world without the need to be presentphysically or otherwise in the consumer's country.” This failure toadapt to the emerging digital economy places a large burden on businessand government alike as well as stagnates technological progress. Notonly do we observe a decreased rate of adaptation to a quickly changinglandscape but also a large margin of fraud and overhead.

One of the world's largest accounting firms PricewaterhouseCoopersconcluded in a study that the average business requires 125 hours tocomply with VAT. 82 of these hours relates to preparation activities, 24hours are spent carrying out filling activities, and the remaining 19hours are spent on payment activities. In addition to time spent theaverage business spends $15,000 a year on compliance costs alone. Thisis due to the fact that the current system imposes a large overhead onthem. Currently, the way consumption tax is collected is cumbersome andinefficient. At the point of sale, tax is determined during thetransaction and then is followed up upon 1-3 months later, essentiallyduplicating previous effort. Authorities then again determine the propertax on these transactions in order to determine the validity of taxpayments. In summary, we “determine” consumption tax three times: firstat the time of the transaction; then during compliance; and finally,when the tax authority receives the transactions.

Governments of the world bear a large burden in the form of oversightand lack of compliance. The loss associated with VAT fraud and lack ofcompliance is known as the VAT Gap. The VAT Gap is the differencebetween expected VAT revenues and VAT collected. This issue becomesapparent across the EU-27 block which is calculated to lose $151 billionannually on lost VAT revenue. This loss accounts for 12% of totalexpected VAT revenue. It is estimated that globally $1-2 trilliondollars' worth of VAT tax goes uncollected each year. This figure doesnot include uncollected US sales tax. These figures paint a picture ofendemic failure of the current system to tackle the challenges ofoversight. Across OECD governments VAT accounts for an average of 20% ofGDP. Considering that Consumption Tax accounts for such a large portionof total tax revenue a minor increase in remittance would have outsizedeffects on GDP.

Another form of VAT fraud can take the form of “Missing Trader Fraud” inwhich the perpetrator charges VAT on the sale of goods, and then insteadof paying this over to the government's collection authority theperpetrator pockets the funds.

A consideration to make when assessing the current VAT system are itseffects on developing countries. Due to inefficiency and large overheadassociated with regulatory oversight and tax compliance, the currentsystem of VAT is, at best, expensive for developed countries and, atworst, impossible for developing countries that lack robustinfrastructure.

The current system fails to scale adequately with new technologicalinnovations such as IOT. The global IOT market is set to grow to $457billion by 2020 with the B2B IOT segment generating in excess of $300billion. This will account for over 30 billion connected devices and 5.4billion B2B connected devices by 2020. Many of these devices will carryout financial microtransactions in the form of wide-scalemachine-to-machine transactions. This unprecedented growth will bringwith it perhaps billions of transactions which will require africtionless tax solution that the current model is ill equipped to copewith.

The current VAT system exposes the private information of millions ofindividuals and businesses by storing personal and business financialinformation in centralized public and private databases. In a 2015 cyberhack perpetrated on the IRS exposed over 700,000 taxpayer accounts.Hackers were able to gain access to Social Security numbers, birth datesand income history. Other major breaches of personal information such asthe 2017 Equifax data breach which exposed 145 million Americancitizens' personal information, highlight the risks of storing personaland businesses' financial information in centralized systems. This iscurrently the case regardless of the fact that the individual or entitymay be willfully compliant. Consideration could be made to thoseindividuals or entities who opt-in to a fully tax compliant systemthereby having their privacy protected. Citizens would only have toexpose their private information to government agencies whenirregularities trigger such an action.

For the calculation of VAT across multiple jurisdictions, for examplecross border trade, the destination principle is used. The destinationprinciple allows for VAT to be retained by the jurisdiction in which thetaxed good or service is being sold such that a nation that exports isnot subject to tax with input taxes being refunded and imports beingtaxed on the same basis as domestic supply. In contrast to thedestination principle, under the origin principle each jurisdictionwould levy VAT on the value created within its own borders. Generallyspeaking, goods exported within the EU are eligible to be “Zero VATrated”. “Zero VAT rated” refers to any paid VAT that can be reclaimed.The process of reclaiming this VAT on exports can be a laborious processthat requires special attention in order to ensure compliance and taxefficiency. Recognizing this the OECD states “Cross-border trade ingoods, services and intangibles create challenges for VAT systems,particularly where such products are acquired by private consumers fromsuppliers abroad.”

Accordingly, the new tools for aiding in tax compliance will improve theefficiency and accuracy of complying with tax reporting requirements,especially as they relate to cryptocurrency transactions.

In order to develop a reader's understanding of the innovations,disclosures have been compiled into a single description to illustrateand clarify how aspects of these innovations operate independently,interoperate as between individual innovations, and/or cooperatecollectively. The application goes on to further describe theinterrelations and synergies as between the various innovations; all ofwhich is to further compliance with 35 U.S.C. § 112.

BRIEF SUMMARY

The present innovations generally address systems and methods for aidingtax compliance.

In one aspect according to one embodiment, a method for calculating andremitting tax obligations, comprises receiving an identification of anitem to be purchased, receiving an identification of an identity walletfor a purchaser, the identity wallet having been verified by agovernment of an agent thereof, using the identification of thepurchaser's identity wallet, obtaining verified information from thepurchaser's identity wallet, using the verified information from thepurchaser's identity wallet, together with the identification of theitem to be purchased, calculating a tax owed and a taxing authority towhich the tax is owed, based on the identification of the item to bepurchased, initiating a first cryptocurrency transaction to transfer apurchase price of the item to a seller of the item, and initiating asecond cryptocurrency transaction to transfer the tax owed to a taxreserve owned by the taxing authority to which it is owed.

In another example, the second cryptocurrency transaction is recorded ina smart contract on a distributed ledger.

In yet another example, the identity wallet is recorded on a distributedledger.

In a further example, the method further comprises identifying to thepurchaser which verified information is to be retrieved from thepurchaser's identity wallet and only retrieving said verifiedinformation is consent is received from the purchaser to do so.

In a further example, the method further comprises obtaining verifiedinformation about a seller from which the item is to be purchased froman identity wallet of the seller that has been verified by a governmentor an agent thereof, wherein the calculation of the tax owed and thetaxing authority to which it is owed is also based on the verifiedinformation from the seller's identity wallet.

In a further example, the method further comprises presenting the resultof the calculation of the tax owed to the purchaser and proceeding withthe first and second cryptocurrency transactions only if consent isreceived from the purchaser to do so after having been presented thecalculation result.

In a further example, a tax calculation engine employed to perform thecalculation of tax owed is verified by a government or its agent.

In a further example, a transaction initiation engine employed toperform at least the second cryptocurrency transaction if verified by agovernment or its agent.

In a further example, the second cryptocurrency transaction records, inaddition to the transfer of tax owed, an identification of the purchaserand seller involved in the transaction.

In a further example, the tax reserve is configured with a predeterminedreserve threshold and any tax transferred to the tax reserve in excessof the tax reserve is transferred to one or more other reserves owned bythe tax authority.

In a further example, the method further comprises receiving an itemreturn request from the purchaser indicating a returned item and anidentification of the first and second cryptocurrency transactions madein connection with the initial purchase of the item and initiating athird cryptocurrency transaction with the tax reserve including theidentification of the second cryptocurrency transaction as well as anidentification of the returned item to transfer an amount of the taxinitially transferred via the second cryptocurrency transaction that isattributable to the returned item back to the purchaser from the taxreserve.

BRIEF DESCRIPTION OF THE DRAWINGS

The accompanying drawings illustrate various non-limiting, example,innovative aspects in accordance with the present descriptions:

FIG. 1 shows a block diagram illustrating an exemplary existingconsumption tax collection scheme.

FIG. 2 shows a block diagram illustrating an example of a transactionprocess flow according to an exemplary embodiment.

FIG. 3 shows a block diagram of a process for executing a transactionaccording to an exemplary embodiment.

FIG. 4 shows a block diagram of another process for executing atransaction according to an exemplary embodiment.

FIG. 5 shows an example of an online eCommerce marketplace according toan exemplary embodiment.

FIG. 6 shows an example of a login request on an online eCommercemarketplace according to an exemplary embodiment.

FIG. 7 shows an example of an identification verification request on anonline eCommerce marketplace according to an exemplary embodiment.

FIG. 8 shows an example of an online eCommerce marketplace afteridentity verification according to an exemplary embodiment.

FIG. 9 shows an example of a shopping cart on an online eCommercemarketplace according to an exemplary embodiment.

FIG. 10 shows an example of a shipping address verification on an onlineeCommerce marketplace according to an exemplary embodiment.

FIG. 11 shows an example of a shipping method verification on an onlineeCommerce marketplace according to an exemplary embodiment.

FIG. 12 shows an example of an order placement page of an onlineeCommerce marketplace according to an exemplary embodiment.

FIG. 13 shows an example of a pre-payment login request on an onlineeCommerce marketplace according to an exemplary embodiment.

FIG. 14 shows an example of a pre-payment identification verification onan online eCommerce marketplace according to an exemplary embodiment.

FIG. 15 shows an example of a payment verification on an onlineeCommerce marketplace according to an exemplary embodiment.

FIG. 16 shows an example of an order and payment confirmation on anonline eCommerce marketplace according to an exemplary embodiment.

DETAILED DESCRIPTION

Embodiments of systems and methods for aiding tax compliance aredescribed herein. While aspects of the described tax compliance aidingsystems and methods can be implemented in any number of differentconfigurations, the embodiments are described in the context of thefollowing exemplary configurations. The descriptions and details ofwell-known components and structures are omitted for simplicity of thedescription, but would be readily familiar to those having ordinaryskill in the art.

The description and figures merely illustrate exemplary embodiments ofthe inventive tax compliance aiding systems and methods. It will thus beappreciated that those skilled in the art will be able to devise variousarrangements that, although not explicitly described or shown herein,embody the principles of the present subject matter. Furthermore, allexamples recited herein are intended to be for illustrative purposesonly to aid the reader in understanding the principles of the presentsubject matter and the concepts contributed by the inventors tofurthering the art, and are to be construed as being without limitationto such specifically recited examples and conditions. Moreover, allstatements herein reciting principles, aspects, and embodiments of thepresent subject matter, as well as specific examples thereof, areintended to encompass all equivalents thereof.

For example, the description provided herein generally describes theinventions with respect to a consumption-based value added tax, but oneskilled in the art will appreciate that the inventions may be applied toother types of tax regimes as well including, for example, sales tax,goods and services tax, payroll tax, property tax, etc. As anotherexample, the present description focuses its discussion on anapplication to transactions involving cryptocurrency, however oneskilled in the art will appreciate that the inventions are applicable toother types of transactions as well.

In general, the systems and methods described herein may relate toimprovements to aspects of manipulating information using a computer.These improvements not only improve the functioning of how such acomputer (or any number of computers employed in the search) is able tooperate to serve the user's goals, but also improves the accuracy andefficiency of the user's interactions and submissions with taxingauthorities.

In one embodiment, the inventive system may be configured to ensureconsumption tax compliance using distributed ledger technology. In oneexample, the inventive system considers the sovereign identity ofindividuals and businesses in order to calculate and remit consumptiontax, which can largely eliminate today's compliance and audit processes.With the systems and methods described herein, businesses no longer needto calculate and collect tax, nor fear audits. The innovations describedherein improve data privacy, expand tax bases, streamline and lowercosts associated with tax compliance, bolster global trade, and reducegovernment bureaucracy.

In one embodiment, a vendor may create a tax tool that eCommerce,Point-of-Sale, etc. systems can utilize. The tool may be certified by agovernmental tax authority, its designee or an accounting firm or otherspecialized type of firm prior to use so that it can be relied upon bybusinesses and government alike to provide a guaranteed calculation,collection and remittance of the correct consumption tax amount.

In one aspect, the establishment of verified identity wallets bygovernmental bodies enables the inventive system a way to efficientlyobtain verified information with minimal privacy concerns. In order todetermine the attribution for tax payments and individual tax statusesit is important to have a verified source of identity information forbusiness and individuals participating in the transaction.

An identity wallet may also be established by a governmental body orother trusted agency and provided to consumers and sellers in a market.Such an identity wallet may utilize distributed ledger technology. Suchan identity wallet is a verified repository for information about theconsumer relevant for tax purposes, but protected in a way that complieswith applicable personal information privacy laws. Because theinformation contained in an identity wallet will have been verified bythe government or its trusted agent, the information contained thereinmay be assumed to be accurate for tax compliance purposes. Theinformation contained in the identity wallet includes, for example, theconsumer's residence location information, any applicable tax exemptionor reduction status, etc. In another example, a consumer's identitywallet may be configured to retain information regarding their personalpreferences, for example their past shopping history, consumptionaddress, and other data that may be used to finalize a sale. In asimilar fashion, each seller also has an identity wallet to hold therelevant information of the seller. If a person or entity makes bothpurchases and sales, one identity wallet may be used for both purposes.

The viability of a blockchain based identity system that is verified bygovernment authorities has been tested in Zug, Switzerland. The city ofZug issued a Zug ID that acts as a certificate of digital citizenship.In another example, a service known as UPort enables individuals andbusinesses to obtain a sovereign digital identity that can be verifiedby governments.

In one example, shown generally in FIG. 5 , a seller may establish aneCommerce website listing one or more products or services for sale. Ofcourse, one skilled in the art will appreciate that the innovationsdescribed herein are equally applicable to a brick-and mortar store oranother type of seller-purchaser transaction other than retail. As shownin FIG. 6 , an eCommerce website may ask each consumer, upon entry tothe site, for access to their identity wallet. In response, purchasersmay be given the option of providing access to their identity wallet tothe seller at that point or to wait until a transaction is imminent,i.e. at checkout. If the purchaser decides to provide access to theiridentity wallet, which may be accomplished by the user providing aunique ID or other identifying information (as shown in FIG. 7 ), thewebsite may be configured to inform the potential purchaser about whichinformation contained in the identity wallet the seller is requesting toaccess. The purchaser may then select which of the requested informationin its identity wallet it wishes to share. If the seller is satisfiedwith the information permitted to be shared, the user is permitted tocontinue their use of the seller's website, as shown in FIG. 8 .However, if the purchaser (through an automated or manual review, forexample) is not satisfied with the amount or type of information thatthe purchaser is willing to share with the seller, the seller may electto decline the purchaser further use of the website. For example, aseller may determine that being allowed to know a purchaser's residencyinformation is a prerequisite for use of the website, but may determinethat access to a purchaser's personal purchasing history is an optionalpiece of information to be shared.

A consumer peruses the eCommerce site and places goods or services in avirtual shopping cart, as shown in FIG. 9 . When the consumer is ready,they elect to begin a checkout process, shown generally in FIG. 2 . Asshown in FIG. 10 , the consumer may be asked to verify the deliveryaddress and, as shown in FIG. 11 , the delivery method. Based on theinformation entered so far, the system may request an estimated taxamount from a tax determination service and, as shown in FIG. 12 , afinal order placement screen may be presented with all transactioninformation. After a consumer proceeds with the order, if they haven'tprovided it already, the consumer will be prompted to provide theiridentity wallet information to continue the transaction, as shown inFIG. 13 . The consumer may be prompted to provide their specificidentity information via an application installed on a mobile device, asshown in FIG. 14 . At this stage, the seller may choose to only requestaccess to the minimum information needed for tax purposes, for examplethe consumer's residency location and tax exemption or reduction status.If the consumer fails to provide access to a sufficient amount ofinformation from their identity wallet, the seller may have the optionof declining the sale or continuing using a default set of information.For example, a brick and mortar store may use as default information fortax purposes (e.g., in an “uncertified sale”) its own physical location.

Next, the transaction information is sent to the verified taxdetermination engine for final computation of the appropriate tax. Then,just prior to payment, the consumer is prompted for final authorizationto pay the appropriate amounts to the seller for the good or servicethat is the subject of the transaction and the appropriate amount oftax, calculated by the inventive system, to the appropriate governmentalbody, as shown in FIG. 15 . The calculation of the appropriate amount oftax is accomplished using as inputs the identity wallet information ofthe seller and purchaser as well as an information about the good orservice that is the subject of the transaction. Following finalauthorization from the consumer, the appropriate transactions arecarried out on the distributed ledger(s) to effectuate the payment tothe seller and to the governmental body.

In one example, the payment of tax to the governmental body isaccomplished via a smart contract that acts as a tax reserve account.Such account is owned by the governmental body, but the governmentalbody may elect to outsource control of the account to a third party. Thetax reserve account collects tax and is configured with a predeterminedreserve amount to cover the refund of taxes in connection with consumersreturning goods. In the case of a return transaction, for example, anidentification of the original transaction and which item on thattransaction may be passed to a smart contract with a record of thetransaction for verification and recordation prior to refund of thepurchase price for the returned item. Any amount of tax contributed tothe reserve account in excess of the predetermined reserve amount may betransferred to a different account of the governmental body.

In one aspect, the use of blockchain technology, the technology behindcryptocurrencies such as Bitcoin and Ethereum, may play a central rolein the administration of the inventive system. At the core ofblockchains are collections of data called blocks. Each block is theresult of multiple mathematical computations on some transactions. Forexample, a transaction might be sending Bitcoin to a Bitcoin address inthe case of the Bitcoin network or executing a function in a smartcontract in the case of Ethereum. Once the block is computed, it is sentto other nodes (miners) in the network for confirmation and, once amajority of nodes have verified the block, it is made the most recentblock. The next block must use a seed based on the hash of the currentblock, chaining block together and repeating the cycle.

The users who do the required computation on the network for the nextblock receive a digital asset, such as Bitcoin, for their efforts. Thisprocess is called mining and is the process which generates new coins onthe network. In the Ethereum network, mining is done by processingtransactions which can either be calls to programs stored on theEthereum blockchain or transfers of Ether between users.

In another aspect, smart contracts may be utilized to record elements ofa transaction. For example, different smart contracts may be establishedand maintained using distributed ledger technology to record differentelements of a transaction and to aggregate data from multipletransactions.

For example, a “pass through” smart contract may be configured to managethe sending of funds to both the merchant and the tax reserve contracts.The system submits a transaction which lists which merchants to pay, howmuch to pay the merchants, which tax authorities to pay, and how much topay the tax authorities. The pass through contract then splits the totalpayment according to the ether to the corresponding party.

As another example, a “detailed tax escrow” smart contract may beconfigured to hold taxes sent to it by a user or company as well asadditional related information. Such a smart contract may be configuredto store all the information relating to a tax payment in the smartcontract itself. This may include, for example, the address of the user,the block number, whether or not it was refunded, a transaction ID, andthe amount paid.

In another example, a “basic tax escrow” smart contract may beconfigured to hold tax amounts sent to it by a user or company and toprocess refunds, but does not store other, more detailed information. Inother words, such a “basic tax escrow” smart contract may be used as asimple currency repository.

In yet another example, a “factory” smart contract may be configured todeploy and track all tax escrow contracts. Such a smart contract allowsfor the deployment of new contracts from trusted sources and can also beconfigured to permit upgrading and removing other smart contracts asnecessary.

FIG. 3 . is a block diagram depicting an illustrative embodiment of asystem according to the present disclosure. As shown in FIG. 3 , at thepoint of sale, which may be, for example, an online eCommerce websitewith a shopping cart, a transaction is initiated by sending 30 to a taxdetermination engine information from a purchaser and a sellersufficient to retrieve information from those entities' respectiveidentity wallets as well as information about the transaction. The taxdetermination engine, using the identity information from the point ofsale system, queries 31 a verified identity wallet system for verifiedidentity information relevant to the transaction, which is returned 32to the tax determination engine. Using the verified identity walletinformation and the initially received transaction information, theappropriate amount of tax is determined and communicated 33 to the pointof sale. This tax information may also include an identification or theappropriate taxing authority of governmental body to which the tax isowed. The tax information, as well as the transaction information, maybe presented to the purchaser for their final approval.

Upon receipt of purchaser approval, the point of sale system maycommunicate 34 to a payment processing system the transaction and taxinformation as well as payment information submitted by the purchaser.The payment processing system may communicate 35 the transactioninformation back to the tax determination information for verificationof the actual tax owed. The tax determination engine may be configuredto once again provide verified tax information, but this timecommunicated 36 to the payment processing system. The payment processingsystem may then record two transactions—first to the merchant 37 for thetransaction amount and second 38 to a tax escrow of the taxingauthority. The tax escrow may be configured to redirect 39 any taxremittances once the tax escrow is or would be above a predeterminedreserve amount.

FIG. 4 depicts another exemplary embodiment in which the current(previous) process is augmented by the buyer authentication aspects, taxpayment and processor aspects, and tax determination system of thepresent disclosure. Dual blockchain transactions are submitted to thevendor and tax authority by the tax and payment processor.

In these examples, because the tax determination engine, identitywallet, and the payment processing system can be verified bygovernmental bodies, many previously required steps in a transaction andtax reporting thereof may be eliminated. For example, previously, thefollowing 24 steps might have been necessary to implement, collect andreport a consumption tax:

-   -   1. Tax Authority creates and publishes tax registration        regulations    -   2. Tax Authority creates and publishes tax determination        regulations    -   3. Tax Authority creates and publishes tax compliance/reporting        regulations    -   4. Tax Authority creates and publishes tax transaction        (eInvoice, SAF-T) regulations    -   5. Tax Authority implements registration solutions    -   6. Tax Authority implements compliance/reporting solutions    -   7. Tax Authority implements Invoice/SAF-T logging solutions    -   8. Vendors implement tax determination solutions    -   9. Vendors' solution certified    -   10. Vendors implement tax compliance/reporting solutions    -   11. Vendors implement Invoice/SAF-T logging solutions    -   12. Business(es) register for VAT    -   13. Business(es) setup tax determination solution (only        eCommerce and POS solutions setup to use the T &PS)    -   14. Business(es) setup tax compliance/reporting solution    -   15. Business(es) setup invoice/SAF-T logging or real-time        invoice requests    -   16. Business(es) execute tax determination on every transaction    -   17. Business(es) frequently (e.g., daily) log Invoices/SAF-T to        Tax Authority—OR—request and process real-time valid invoice        numbers.    -   18. Business(es) periodically (e.g., quarterly) gather all of        their detailed transactions for the period and create a tax        return/report. File the return and remit their tax due.    -   19. Tax Authority receives tax return and processes (e.g.,        analyze data compliance/fraud).    -   20. Tax Authority receives tax remittance.    -   21. Tax Authority receives Invoice/SAF-T logs and processes        (e.g., analyze data for compliance/fraud).    -   22. Tax Authority selects business for audit.    -   23. Tax Authority and Business work together to gather/exchange        data and perform audit.    -   24. Tax Authority and Business work together to close Audit and        finalize Settlement.

However, under the system proposed herein, the most expensive steps ofthe previous process are eliminated, and the steps that remain becomenecessary for only a few vendors rather than every business. In theproposed system, the steps are:

-   -   1. Tax Authority creates and publishes tax registration        regulations    -   2. Tax Authority creates and publishes tax determination        regulations    -   3. Tax Authority implements registration solution    -   4. Vendors implement Real-Time: Tax & Payment Solution (“T&PS”)    -   5. Vendors' solution certified    -   6. eCommerce and POS systems setup Determination and T&PS. Each        business doesn't need to separately setup.    -   7. eCommerce and POS systems execute Determination and T&PS.        Each business doesn't need to separately execute.    -   8. Tax Authority receives tax remittance.

Governments of the world bear the lion's share of the burden of ensuringtax compliance. Using the present system, tax authorities willdramatically cut down on oversight costs. The need to determine theappropriate amount to tax due will be automated thus cutting down on aconsiderable amount of expense. Only transactions that are irregularwill trigger a need for further audit.

The average business spends between $3,000-$500,000 per year oncompliance with $15,000 being the average. Much of this expense can beattributed to the way tax is determined. The present solution removesthe duplication of efforts by ensuring all payment made through thesystem will automatically have tax determination, remittance andattribution. Tax authorities will have a clear audit trail ifirregularities are noted. This automated process removes overhead forbusiness and significantly reduces risk of audit.

Calculating taxes owed across multiple jurisdictions can be a laboriousprocess. These processes can be automated by a system that takes intoaccount the jurisdiction along with the identity of sellers and goods.Tax that needs to be reclaimed or claimed would be done soinstantaneously.

In a future in which IOT devices produce a great deal financialmicrotransactions in the form of machine-to-machine connections,transactions must be underpinned by a tax infrastructure, such as theone proposed herein, that can support a high throughput infrastructure.

Users of the present system will be in complete control of theirpersonal data through the identity verification systems proposed herein.Identity and access control may be managed through the individual'smobile device. Only parties that have asked for permission will be ableto access data. This permission can be revoked at any time. Identityownership is determined by possession of a digital private key thatcontrols a public key associated with the identity. If a private key islost or stolen, user identities can be recovered by having trustedfriends or institutions attest to the change. This decentralized modelplaces the power of control in the hands of the user ensuring thatprivate data cannot be exposed.

Although the above description focuses on an example in which a seller'spoint of sale system interfaces with and includes aspects of thedescribed system, another possible implementation is that of an onlinemarketplace administered by a single entity in which many differentsellers participate. eBay and Amazon, for example, are marketplaces inwhich many sellers participate and offer their products and services forpurchase. A system according to the present invention may be deployed bysuch a marketplace for many or all of the sellers in its platform touse.

FIGS. 1 through 16 are conceptual illustrations allowing for anexplanation of the present disclosure. It should be understood thatvarious aspects of the embodiments of the present disclosure could beimplemented in hardware, firmware, software, or combinations thereof. Insuch embodiments, the various components and/or steps would beimplemented in hardware, firmware, and/or software to perform thefunctions of the present disclosure. That is, the same piece ofhardware, firmware, or module of software could perform one or more ofthe illustrated blocks (e.g., components or steps).

In software implementations, computer software (e.g., programs or otherinstructions) and/or data is stored on a machine readable medium as partof a computer program product, and is loaded into a computer system orother device or machine via a removable storage drive, hard drive, orcommunications interface. Computer programs (also called computercontrol logic or computer readable program code) are stored in a mainand/or secondary memory, and executed by one or more processors(controllers, or the like) to cause the one or more processors toperform the functions of the disclosure as described herein. In thisdocument, the terms “machine readable medium,” “computer program medium”and “computer usable medium” are used to generally refer to media suchas a random access memory (RAM); a read only memory (ROM); a removablestorage unit (e.g., a magnetic or optical disc, flash memory device, orthe like); a hard disk; or the like.

Notably, the figures and examples above are not meant to limit the scopeof the present disclosure to a single embodiment, as other embodimentsare possible by way of interchange of some or all of the described orillustrated elements. Moreover, where certain elements of the presentdisclosure can be partially or fully implemented using known components,only those portions of such known components that are necessary for anunderstanding of the present disclosure are described, and detaileddescriptions of other portions of such known components are omitted soas not to obscure the disclosure. In the present specification, anembodiment showing a singular component should not necessarily belimited to other embodiments including a plurality of the samecomponent, and vice-versa, unless explicitly stated otherwise herein.Moreover, the applicants do not intend for any term in the specificationor claims to be ascribed an uncommon or special meaning unlessexplicitly set forth as such. Further, the present disclosureencompasses present and future known equivalents to the known componentsreferred to herein by way of illustration.

The foregoing description of the specific embodiments so fully revealsthe general nature of the disclosure that others can, by applyingknowledge within the skill of the relevant art(s), readily modify and/oradapt for various applications such specific embodiments, without undueexperimentation, without departing from the general concept of thepresent disclosure. Such adaptations and modifications are thereforeintended to be within the meaning and range of equivalents of thedisclosed embodiments, based on the teaching and guidance presentedherein. It is to be understood that the phraseology or terminologyherein is for the purpose of description and not of limitation, suchthat the terminology or phraseology of the present specification is tobe interpreted by the skilled artisan in light of the teachings andguidance presented herein, in combination with the knowledge of oneskilled in the relevant art(s).

In order to address various issues and advance the art, the entirety ofthis application for SYSTEMS AND METHODS FOR AIDING TAX COMPLIANCE(including the Cover Page, Title, Headings, Cross-Reference to RelatedApplication, Background, Brief Summary, Brief Description of theDrawings, Detailed Description, Claims, Figures, and otherwise) shows,by way of illustration, various embodiments in which the claimedinnovations may be practiced. The advantages and features of theapplication are of a representative sample of embodiments only, and arenot exhaustive and/or exclusive. They are presented only to assist inunderstanding and teach the claimed principles. It should be understoodthat they are not representative of all claimed innovations. As such,certain aspects of the disclosure have not been discussed herein. Thatalternate embodiments may not have been presented for a specific portionof the innovations or that further undescribed alternate embodiments maybe available for a portion is not to be considered a disclaimer of thosealternate embodiments. It will be appreciated that many of thoseundescribed embodiments incorporate the same principles of theinnovations and others are equivalent. Thus, it is to be understood thatother embodiments may be utilized and functional, logical, operational,organizational, structural and/or topological modifications may be madewithout departing from the scope and/or spirit of the disclosure. Assuch, all examples and/or embodiments are deemed to be non-limitingthroughout this disclosure. Also, no inference should be drawn regardingthose embodiments discussed herein relative to those not discussedherein other than it is as such for purposes of reducing space andrepetition. For instance, it is to be understood that the logical and/ortopological structure of any combination of any program components (acomponent collection), other components and/or any present feature setsas described in the figures and/or throughout are not limited to a fixedoperating order and/or arrangement, but rather, any disclosed order isexemplary and all equivalents, regardless of order, are contemplated bythe disclosure. Furthermore, it is to be understood that such featuresare not limited to serial execution, but rather, any number of threads,processes, services, servers, and/or the like that may executeasynchronously, concurrently, in parallel, simultaneously,synchronously, and/or the like are contemplated by the disclosure. Assuch, some of these features may be mutually contradictory, in that theycannot be simultaneously present in a single embodiment. Similarly, somefeatures are applicable to one aspect of the innovations, andinapplicable to others. In addition, the disclosure includes otherinnovations not presently claimed. Applicant reserves all rights inthose presently unclaimed innovations including the right to claim suchinnovations, file additional applications, continuations, continuationsin part, divisions, and/or the like thereof. As such, it should beunderstood that advantages, embodiments, examples, functional, features,logical, operational, organizational, structural, topological, and/orother aspects of the disclosure are not to be considered limitations onthe disclosure as defined by the claims or limitations on equivalents tothe claims. It is to be understood that, depending on the particularneeds and/or characteristics of an individual and/or enterprise user,database configuration and/or relational model, data type, datatransmission and/or network framework, syntax structure, and/or thelike, various embodiments may be implemented that enable a great deal offlexibility and customization. While various embodiments and discussionshave included reference to applications in the retail and blockchaincontexts, it is to be understood that the embodiments described hereinmay be readily configured and/or customized for a wide variety of otherapplications and/or implementations.

What is claimed is:
 1. A system for calculating and remitting taxobligations, the system comprising at least one processor, the system incommunication with a consumer device and a point of sale system toimprove functioning of the consumer device and point of sale systemusing distributed ledger technology, wherein the system is configuredto: receive, via the at least one processor, a first identification ofan item to be purchased via the point of sale system; in response to anelectronic interface of the point of sale system being accessed by theconsumer device, generate an identification verification requestconfigured for presentation via the electronic interface of the point ofsale system; receive, from the consumer device, an access authorizationfor digital data associated with a consumer identifier related to theconsumer device in response to the identification verification request;receive, via the at least one processor and in response to the accessauthorization received from the consumer device, a second identificationof an identity wallet configured as a distributed ledger repository forthe digital data associated with the consumer identifier related to theconsumer device, the identity wallet being verified by a government oran agent thereof, and the digital data associated with the identitywallet being distributed via one or more network nodes of a network;using the second identification of the identity wallet, query, via thenetwork and the at least one processor, the identity wallet to obtain atleast a portion of the digital data associated with the identity walletbased on a distributed ledger protocol configured for the distributedledger repository; using at least the portion of the digital dataassociated with the identity wallet, together with the firstidentification of the item to be purchased, calculate tax dataassociated with the item to be purchased and determine a taxingauthority identifier for the tax data; based on the first identificationof the item to be purchased, initiate a first cryptocurrency transactionto transfer a purchase price of the item to the point of sale systemassociated with the item via the network; and initiate a secondcryptocurrency transaction to transfer the tax data to a tax reservesystem associated with the taxing authority identifier via the network,wherein the first cryptocurrency transaction and the secondcryptocurrency transaction improve efficiency of network interactionswith respect to the consumer device and point of sale system.
 2. Thesystem of claim 1, wherein the second cryptocurrency transaction isrecorded in a smart contract on a distributed ledger.
 3. The system ofclaim 1, wherein the one or more network nodes are associated with adistributed ledger.
 4. The system of claim 1, wherein the system isfurther configured to obtain verified information related to a selleridentifier associated with the point of sale system from a differentidentity wallet associated with the seller identifier, wherein thecalculation of the tax data is further based on the verified informationobtained from the different identity wallet.
 5. The system of claim 1,wherein the system is further configured to present the tax data via theconsumer device, and to proceed with the first cryptocurrencytransaction and the second cryptocurrency transaction in response to aconsent indication being received from the consumer device.
 6. Thesystem of claim 1, wherein the second cryptocurrency transactionrecords, in addition to the transfer of tax data, the consumeridentifier and a seller identifier associated with the point of salesystem involved in the second cryptocurrency transaction.
 7. The systemof claim 1, wherein the tax reserve system is configured with apredetermined reserve threshold and any tax transferred to the taxreserve in excess of the predetermined reserve threshold is transferredto one or more other tax reserve systems associated with the taxauthority identifier.
 8. The system of claim 1, wherein the system isfurther configured to: receive an item return request from the consumerdevice indicating a returned item and an identification of the secondcryptocurrency transactions initiated in connection with an initialpurchase of the item; and initiate a third cryptocurrency transactionwith the tax reserve system including the identification of the secondcryptocurrency transaction and a different identification of thereturned item to transfer at least a portion of the tax data transferredvia the second cryptocurrency transaction that is attributable to thereturned item back from the tax reserve.